Bloomberg News

Asia-Pacific Bond Risk Rises, Credit-Default Swap Prices Show

June 21, 2012

The cost of insuring Asia-Pacific corporate and sovereign bonds from default increased, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan gained 4 basis points to 181 basis points as of 8:21 a.m. in Hong Kong, according to Credit Agricole SA. (ACA) The gauge is set for its highest close since June 14, according to data provider CMA.

The Markit iTraxx Japan index climbed 4 basis points to 187 as of 9:41 a.m. in Tokyo, Citigroup Inc. prices show. The measure is headed for its highest close since June 8, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Australia index rose 1 basis point to 186 basis points as of 10:13 a.m. in Sydney, National Australia Bank Ltd. (NAB) according to NAB prices. The benchmark is on track to increase about 38 basis points since April 1, the prices show. It would be the first quarterly gain since the period ended September, according to CMA.

Credit-default swap indexes are benchmarks for protecting bonds against default and traders use them to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite.

The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements. A basis point is 0.01 percentage point.

To contact the reporter on this story: Rachel Evans in Hong Kong at revans43@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net


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